House prices are falling in almost a third of the UK’s local housing markets, according to research findings that suggest tighter mortgage lending rules have cooled the market boom.

The proportion of postcode districts where prices fell during the three months to November has risen from less than one in five last spring, according to a study for the Financial Times by the data company Hometrack.

In London, the slowdown has been more intense. A quarter of London areas are now experiencing falling prices — up from about 5 per cent in May.

At a national average level, house prices are still rising across the country. The UK-wide average price rose 10.4 per cent in the year to the end of October, according to the Office for National Statistics, with regional price growth ranging from 17.2 per cent in London to 3.9 per cent in northeast England.

The area with the strongest house price growth nationally is Milton Keynes, which is benefiting from both its proximity to London and a tide of inward investment.

Other good-value locations around the fringe of London are also still doing well, including Aldershot, Stanwell — just south of Heathrow airport — and Roydon, near Harlow in Essex.

But these figures hide considerable local variations, Hometrack found.

The price falls in local postcode districts are fairly evenly distributed across the country, rather than being geographically concentrated.

“In these markets, transaction volumes are drying up pretty fast,” said Richard Donnell, Hometrack research director. “These areas were being pushed along by buyers who were stretching themselves [with mortgage borrowings].”

The Bank of England noted the slowdown last week in its latest financial stability report, citing the introduction of the mortgage market review as a leading driver of the trend. Lenders’ credit scoring criteria have tightened, the BoE said.

“The signal caused by authorities voicing concerns about the housing market may have encouraged some lenders and borrowers to move away from high-risk mortgages,” said the report.

Previously high-growth areas slowing rapidly include Aberdeen, which has also been hit by the oil industry slowdown, as well as popular commuter districts such as Lakenheath near Cambridge, Redland in Bristol and Caversham in Reading.

In London, the worst-affected areas are relatively cheap inner-city boroughs that have become hotspots for first-time buyers. Wandsworth, Lambeth, Southwark and Lewisham have seen the sharpest falls in price growth.

At a local level, Shepherd’s Bush, Kennington, Streatham and Earls Court have all seen previously rapid price growth turn negative in the past three months — as has Knightsbridge, Britain’s most exclusive address.

The affordability test has effectively stopped a London-style boom from spreading out into the regions

- Richard Donnell, Hometrack research director

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House prices around the country began to rise rapidly from early 2013, and received a boost from the government’s Help to Buy scheme . Concerned about the prospect of a bubble, financial regulators tightened mortgage lending rules in May.

In the capital, the proportion of areas where price growth is still accelerating has dropped from 70 per cent in May to 5 per cent in November.

“The affordability test has effectively stopped a London-style boom from spreading out into the regions,” said Mr Donnell.

New mortgage approval volumes have been falling for several months as lenders implement the new rules.

“Everything is coming off the boil very quickly,” said Mr Donnell. “We have had a huge surge of pent-up demand coming into the market from January 2013 onwards, but we are now running out of people who want to move or can afford to move.”

Chancellor George Osborne’s recent stamp duty reform could counterbalance this effect by boosting transaction levels in the coming months, said the BoE.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said there had “clearly been a shift in the way that buyers are looking at the market” — pointing to more restrictive lending regulations as well as the impact of rhetoric from policy makers on buyers’ expectations.

However, Mr Rubinsohn said he did not believe that there was any immediate danger of a widespread substantial fall in values, citing a boost from the government’s stamp duty reforms, coupled with a resilient economy with more people in work.

“To have a major repricing, you have to have the macroeconomic conditions,” he added.

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